FX Flows

From the FXWW Chatroom: Commodity prices scaled back this morning, especially after Chinese trade data.

Following RBA Deputy Governor Philip Lowe’s remark about welcoming a slightly lower exchange rate, leverage accounts were reported selling AudJpy and more offers said to be farmed from 84.75 to 85-handle. AudUsd and AudNzd both backed off the morning high. I heard AudUsd bids scattered below and more into 0.7420’s from technical accounts while offers are lined up nearer to 0.7500. AudNzd was happily above 1.1000 turned around and printed 1.0984.

After the Chinese data, AudJpy was sold again and AudUsd printed 0.7417. We sold the cross into the 83.70’s and market took it well.

UsdJpy, which at the NY close was 113.40’s, traded weaker to 113.03 on back of AudJpy sales. Unconfirmed talks some bids from Tokyo scattered under 113.20 from a name we shall not speak of, I call him the “Dark Lord” but then, nothing confirmed. Some said the bids goes all to mid-112’s. Offers are atop 113.70’s.

16:40:24

Nikkei kicked off flattish then slipped -1.2% on weaker UsdJpy. Into mid-morning, UST yields slipped, UsdJpy, AudJpy and CadJpy sold giving UsdJpy a push below 112.75. It was into late morning, UsdJpy bounced back to 113-handle. Why? No one knows really. What I was told the “Dark Lord” bought some.

UsdCad ended Toronto in the low 1.3280’s. The pair climbed slowly and then popped above 1.3300 on back of CadJpy sales. Offers are light but we expect both macro and technical accounts to sell into any rally. Downside, small buying with nothing outstanding.

From our strategist in Toronto, Bipan Rai noted that UsdCad closed below the 200-Day MA and next level at 1.3250. Even oversold, there are still lots of interest to continue to sell rallies. BOC will take the opportunity to be very dove and Bipan thinks the juice on the mi-term short isn’t attractive. Our trader Jon agrees. He said looking at the 2-year yield spreads, points the UsdCad to 1.38’s. Yes, we are fighting against the rising oil prices and momentum shifted to the downside. But chart-wise, it does seem like an overreaction. This might just be systematic funds turning positions.

Asians
Usd/Asia recovered little in the morning; we think this is all position adjusting amid slight risk off.

Talk from the equity market that some long/short equity funds are buying downside protection in China equity futures. Hearsay about 32k contracts sold in the China A50 Futures. Bears are back as increase in put options in HSCEI in good size.

USDCNY fixed at 6.5041 versus estimates of 6.5095-6.5130. Though lower, USDCNH climbed on risk-off sentiment. Seemed some offers atop 6.5100 at this moment.

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